LLM6010 - Conversion: types of conversion vehicle

Until 1993 all members of Lloyd’s were individuals, underwriting on the basis of unlimited personal liability for their share of any loss of a syndicate of which they were members. As part of the plan for ‘Reconstruction and Renewal’ ( LLM1020) Lloyd’s admitted corporate members for the first time. Such members underwrite on the basis that their liability is ultimately limited to the extent of their capital.

Two forms of corporate member were admitted to the Lloyd’s market – limited liability companies (from 1994) and Scottish limited partnerships, SLPs, (from 1997). From 1996 individual Names were allowed to ‘convert’ the form of their underwriting to these limited liability formats, by becoming shareholders in corporate members, or (later) by becoming partners in SLPs. Typically such conversions involve the transfer of the former member’s syndicate capacity to the company or the SLP in return for shares or some other kind of interest in the vehicle. The use of an individual’s Funds at Lloyd’s (FAL) to support the underwriting of both the former member and the new entity is referred to as ‘interavailability’ ( LLM6020).

Three types of conversion arrangement have been used so far

• ‘collective conversion schemes’, under which a number of Names transfer syndicate capacity and make FAL interavailable to a company that is a corporate member, in return for shares in and/or securities of the company ( LLM6030);
• ‘Namecos’, where the Name transfers syndicate capacity and makes FAL interavailable to a close company (see CTM60000+) owned and controlled by the Name ( LLM6050);
• ‘Scottish limited partnerships’, where the Name transfers syndicate capacity and makes FAL interavailable to a SLP in which the transferor is a partner ( LLM6060 onwards).

Namecos and SLPs were originally only conversion vehicles for former individual members, but over time some Namecos have been sold on, and new Namecos and SLPs have been formed to enable both new individual and new corporate capital providers to enter the market. From 2003 no new individual Names have been admitted as members.

With effect from 7 December 2005, the Lloyd’s membership byelaw was amended to admit another type of corporate member – Limited Liability Partnerships (LLPs) formed under the Limited Liability Partnership Act 2000 or its Northern Ireland equivalent. LLPs began underwriting in the 2007 underwriting year. See LLM6150 for more on LLPs.